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Sales Factor Tax Apportionment is Better than G-7 Tax Proposal

Tuesday, June 22nd, 2021

For many years, the Organization for Economic Cooperation and Development (OECD) has been coordinating talks among 140 countries on cross-border tax reform in order to get multi-national corporations to pay their fair share of taxes.  Currently, multinational corporations that have subsidiaries or divisions in other countries use legal accounting strategies to reduce their taxes by transferring profits to lower corporate tax rate countries or set up shell corporations in tax haven countries. It’s not fair for multinational firms to sell products in the U.S. market and then pay little or no federal taxes on the resulting profits. Domestic companies bear the brunt of our country’s tax burden, making it more difficult for them to compete in the global marketplace.

On June 5th, the G-7, which is an informal grouping of seven of the world’s advanced countries:  Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, reached an agreement on two pillars of global tax reform.

Pillar One of the agreement “changes allocation of taxing rights. Under the proposal, companies wouldn’t only owe taxes where they’re established and have assets and employees, but would also owe taxes where they have sales.” This new rule would apply to only the world’s 100 largest and most profitable companies.

Pillar Two “imposes a global minimum tax on potentially any company that has a low effective tax rate on foreign earnings. If companies pay lower rates in a particular country, their home countries could “top-up” their taxes on foreign earnings to the minimum rate, removing the benefits of shifting profits. A proposed global minimum tax rate of “at least 15 percent on a country by country basis,” is designed to discourage multinational corporations from shifting profits to low-tax countries. Hopefully, a “worldwide minimum corporate tax rate would reduce the attractiveness of tax havens, which have increasingly become a common part of global business practice in the last three decades.”

“Corporate profit shifting into tax havens by U.S. multinationals has jumped from roughly 5 to 10 percent of gross profits in the 1990s to roughly 25 to 30 percent in 2019, according to a report by the International Monetary Fund. And the use of tax havens costs governments $500 billion to $600 billion per year in lost corporate tax revenue, according to a study cited by the IMF.”

Daniel Bunn, vice president of global projects at the Tax Foundation, told the Epoch Times, “This agreement is subject to further agreements, there’s a lot of work still to be done to ensure that the policy works well. “I’m concerned that if policymakers aren’t careful, they could impact global foreign direct investment flows and hurt business investments globally.”

“It is a whole new way of doing tax policy for multinationals. And one of the reasons I think that Treasury has tried to limit this to the 100 largest companies is because it has the potential to be really, really complex,” Bunn said.

One advantage of the proposed global minimum tax is that it could potentially end the discussion of digital services taxes on big tech companies, more of which are in America than any other country.

One potential problem is whether OECD would be the organization that would designate the top 100 companies in the world. If so, what criteria would they use and how often would the rating be updated, as the ranking could fluctuate from year to year.

Another consideration is what would be the impact of a 15 percent global minimum tax on U.S. companies combined with the substantial tax increases proposed by President Joe Biden that includes a 15 percent minimum tax on large corporations’ book income, as well as increases to the tax rates on both domestic and foreign income.

These two pillars will be the subject of the meeting of the G-20 countries scheduled for later this summer.

On June 8th, the Coalition for a Prosperous America (CPA) issued a statement, saying they “support the Organization for Economic Cooperation and Development’s (OECD) efforts ‘to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.’ This represents a positive step towards eliminating the ability of multinational companies to avoid paying U.S. corporate tax by shifting profits offshore to tax havens.”

“While not perfect, the G7 announcement represents a positive step forward, especially for family companies like mine that pay a higher corporate tax rate than foreign and multinational competitors,” CPA Chair Zach Mottl said. “To truly end the game of multinational profit shifting, the OECD should implement Sales Factor Apportionment.”

“For too long, multinational corporations have used an army of lawyers and tax accountants to offshore production and avoid U.S. corporate taxes,” said Michael Stumo, CEO of CPA. “It is welcome news that the G7 economies are supportive of addressing the harm to domestic producers from multinational profit shifting. However, it is concerning that the G7 announcement would allow the first 10 percent of profits to be exempt, which would allow some profit shifting to still occur. The Biden administration, which called for implementing Sales Factor Apportionment for the top 100 multinational corporations, should urge the G7 economies and the OECD to fully implement a sales-based apportionment system for all companies shifting profits.”

This OECD proposal would be similar but more limited in scope to the Sales Factor Tax Apportionment (SFA) framework supported by the Board of the Directors of Coalition for a Prosperous America since 2017. One of CPA’s members, Bill Parks, a retired finance professor and founder of NRS Inc. was the originator of the SFA framework. Mr. Parks stated “Currently MNEs manipulate loopholes in our tax system to avoid paying U. S. taxes…MNEs can legitimately choose a cost that reduces or increases the profits of its subsidiaries in different countries. Because the United States is a relatively high-tax country, MNEs will choose the costs that minimize profits in the United States and maximize them in what are usually lower-tax countries.” 

Under SFA, the amount of corporate taxes that a multinational company would pay “would be determined solely on the percent of that company’s world-wide sales made to U. S. customers. Foreign MNEs would also be taxed the same way on their U. S. income leveling the playing field between domestic firms and foreign and domestic MNEs.” Thus, if a company generates $1 billion of profit on its U.S. sales, then it should pay corporate taxes on that $1 billion.

On May 18, 2017, CPA submitted written testimony to the House Ways and Means Committee, stating in part, “The US corporate tax system harms America’s trade competitiveness, overtaxes income from wages, under taxes consumption, and is bad at actually collecting what is owed. It also enables rampant base erosion through transferring profits to tax havens or countries with lower corporate tax rates. Full reform centered around destination based, border adjustment principles can result in an efficient, trade competitive, and largely tamper-proof tax system. SFA is a destination-based profit tax. Pretax income is allocated to the US in proportion to the percentage of a company’s total sales in the U. S. Pre-tax income earned outside the US is not taxed. Tax rates can be lowered substantially while still meeting revenue targets…SFA eliminates the disparate tax treatment between domestic companies (who pay the full income tax burden on worldwide income), multinationals (many of which shift profits to tax havens), and foreign companies (which pay a territorial income tax).” 

In September 2020, ”CPA published an analysis of the federal corporate tax paid by the S&P 500 companies in 2019 and found they paid on average less than 9% in cash federal tax last year. The analysis also found that by replacing the current corporate tax system with an SFA system at 21 percent, the United States could have expected to earn an additional $97.8 billion in federal corporate tax receipts for 2019.”

If the OECD doesn’t expand Pillar One into a SFA plan for all multinational companies, not just the top 100, then the U. S. Congress should act unilaterally to establish this plan here. Multinationals should no longer be allowed to employ convoluted profit calculations or reincorporate in a tax haven country as a means to avoid U.S. tax obligations. We need to take bold action if we want to rebuild our American manufacturing industry to create jobs and prosperity.

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Blacks & Hispanics Suffer from Loss of High Paying Manufacturing Jobs

Tuesday, June 1st, 2021

On May 24th, the Coalition for a Prosperous America released a new working paper, “Job Quality Index for Black, Hispanic and Asian American workers.  In this working paper, Jeff Ferry, CPA Chief Economist, and Amanda Mayoral, CPA Economist, present Job Quality Indexes for three important minority groups within the U.S. workforce: Asian, Black, and Hispanic Americans.

In November 2019, CPA published the first U.S. Private Sector Job Quality Index (JQI) report in partnership with Cornell Law School, The JQI “measures the quality of U.S. jobs as distinct from their quantity” using Bureau of Labor Statistics (BLS) data to calculate the average weekly wage for all Production and Nonsupervisory (P&NS) employees. These workers “make up 80% of the total U.S private sector workforce, 98 million out of a total 122 million workers.”

“The JQI is the ratio of high-quality jobs to low-quality jobs, multiplied by 100 and expressed as an index. By calculating the national average weekly wage for all P&NS employees, we can establish a threshold to split high- and low-quality jobs. The jobs in all sectors delivering a weekly wage above the threshold are termed high quality and all jobs below the threshold are low quality. The average weekly wage, or threshold, as of December 2020 was $857.60.”

Since its inception, the “JQI shows that the U.S. creates millions more low-quality jobs than high-quality jobs each year. The JQI for December 2020 was 80.5, indicating that 55% of nonsupervisory workers worked in low-quality jobs, and only 45% in high-quality.”

The results of the new working paper “show that Black and Hispanic American Job Quality Indexes are far below that for the total U.S. population. Asian American JQI however is substantially higher than the overall U.S. JQI.  The key findings were:

  • “Black American job quality is far worse than that of the total population. The Black Job Quality Index (JQI) for 2020 was 38.7, more than 40 points below the JQI for the total U.S. private sector production and nonsupervisory workforce. For the Black nonsupervisory workforce, 72% of their jobs are low quality, and only 28% rank as high-quality…”
  • The JQI for Hispanic Americans was 38.1 in 2020, 42 points below the U.S. JQI. In 2002, 28% of Hispanic American employees held high-quality jobs and 72% were in low-quality employment. Although far below the U.S. JQI, the Hispanic American JQI rose by 29% since 2007, when it was just 29.5. The increase in the Hispanic American JQI was driven largely by the growth of Hispanic jobs in high-quality health care and construction service jobs.
  • The Asian American JQI began the period well above the total U.S. figure and rose further, to reach 158.3 in 2020. At that level, 61% of Asian American employees were in high-quality jobs, with just 29% in low-quality. The high and rising Asian American JQI was driven by high-quality professional business service, health care, and finance/insurance jobs.

Ferry and Mayoral offered the following opinion: “Despite rising incomes for many Americans since 2007, Black Americans are not getting their fair share. Job growth for Black Americans since 2007 has been concentrated in low-quality jobs, notably in service sector jobs such as food service and social assistance. The slow growth in high-quality jobs since 2007, including a decline in many manufacturing sectors, has made it more difficult for Black and Hispanic Americans to gain access to these jobs. The JQIs for Black and Hispanic Americans reflect the economic inequality faced by these groups.”

They added, “The changing composition of the U.S. workforce in the years since 2000 hits Black Americans harder than it hits other ethnic groups, in particular whites, because Black Americans are more strongly concentrated among the 64% of the U.S. workforce that does not have a four-year college degree. For workers without four-year degrees, the traditional route to a middle-class income has been the manufacturing sector. That sector’s abrupt decline, which began in the 1980s but accelerated after 2000, has forced these workers to look elsewhere for employment. Unfortunately, the service sectors where jobs have grown most rapidly in this century pay well below manufacturing wages.”

It wasn’t “systemic racism” that caused the loss of higher paying manufacturing jobs —it was the greed of large American corporations with multinational presence that wanted to increase profits by shifting manufacturing to cheaper labor countries reduce costs of regulations.  Manufacturing was first shifted to Mexico after NAFTA and then to China after China was allowed into the World Trade Organization in the year 2000 and tariffs were reduced or eliminated. The loss of manufacturing jobs was made worse by   China’s flooding the U.S. with cheap imports that put domestic manufacturers out of business. 

The loss of high paying manufacturing jobs in cities like Detroit, Chicago, Philadelphia, and Pittsburgh, all cities with high Black populations, turned these cities and others into “job deserts” for high paying jobs.

When I visited Cincinnati in 2016 as the guest of Source Cincinnati, I learned that the city had lost 67% of its manufacturing base, and they were implementing a multi-pronged approach to reviving manufacturing jobs. Some cities in the southern states of North and South Carolina lost nearly all of their textile and furniture manufacturers. In 2017, I saw evidence of this devastation when I visited Greensboro, Raleigh, and High Point in North Carolina and Charleston, South Carolina.

Even in my long-time home of San Diego County, I documented the loss of 185 companies out of my database of about 1,000 manufacturers between 2001 and 2010. I wrote periodic reports starting in 2003, which led me to write my first book, Can American Manufacturing be Saved” Why we should and how we can” published in 2009.  This edition and the 2012 edition described the ramifications of losing 5.8 million manufacturing jobs in the U.S. between 2001 – 2010 and made recommendations on how to save American manufacturing.

In conclusion, Ferry and Mayoral recommended: “Policy initiatives to address the inequality of Black and Hispanic Americans suffering from much lower job quality than the total American population include supporting high-wage industries, notably manufacturing. These industries offer the best opportunity for Black and Hispanic Americans, who have relatively less educational qualifications than other Americans, to find high-quality jobs capable of supporting middle class lifestyles.”

Addressing the problem of rebuilding American manufacturing to create more high paying jobs for all Americans, including Black and Hispanic workers, is the whole focus of my book, Rebuild Manufacturing – the key to American Prosperity published in 2017. Reshoring manufacturing to America and personal decisions by consumers to buy Made in USA products are just two of the simpler ways we can rebuild American manufacturing.

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Mobile Makerspaces Help Entrepreneurs Grow New Manufacturing Businesses

Tuesday, May 18th, 2021

Makerspaces are a good idea for any community that wants to accelerate the development of manufacturing businesses in their region. According to Makerspaces.com, a Makerspace “is a collaborative work space inside a school, library or separate public/private facility for making, learning, exploring and sharing that uses high tech to no tech tools.  These spaces are open to kids, adults, and entrepreneurs and have a variety of maker equipment including 3D printers, laser cutters, CNC machines, soldering irons and even sewing machines.”

Many Makerspaces have been set up in renovated industrial buildings with City Chambers of Commerce or Economic Development agencies or departments as sponsors. However, many community colleges and universities have established Makerspaces on their campuses in recent years. “In 2016,the California Community College Chancellor’s Office, Workforce and Economic Division funded the $17 million CCC Maker Initiative for three years under the Doing What Matters for Jobs and the Economy framework. From January to June, 2017, 35 colleges participated in the Makerspace Startup process. Of those, 28 colleges competed for two-year grants that were awarded to 24 colleges in July 2017.”

Makerspaces are helping to prepare young people with the critical 21st century skills in the fields of science, technology, engineering and math (STEM).  They provide hands on learning and help with critical thinking skills for students. Some of the skills that are learned pertain to electronics, 3d printing, 3D modeling, coding, robotics, woodworking, and metal fabrication.   Makerspaces are also fostering entrepreneurship and are being utilized as incubators and accelerators for business startups.

I recently connected with Joel Leonard of SkillsTV.net and John Martinsic of Forest Scientific Corporation, and they told me about their collaboration in establishing a Mobile Makerspace program for cities, towns, and even rural areas.

They said, “The purpose of a Mobile Makerspace is “to empower under-served communities whether they be inner city or very rural is the education of youth. Students receiving technology education that includes manufacturing are equipped with problem solving skills and will learn that what they dream can become reality. They need exposure to possibilities to open their minds to new paradigms and

relieve them of limitations that only exist in their mind. In the new economy, entrepreneurs will have an increasing role in the overall job market and these young minds will fuel the economies of their communities where big multinationals are not interested in having a presence. It is great for regional economic development.”

They explained that by sharing a mobile Makerspace, schools, libraries, Small Business Development

Corporations, incubators, and economic and industrial development organizations can serve

more people and develop an interest in using the facilities of a Makerspace before building a permanent site. This can provide more utilization and less down time. Community interest will help with funding and the potential of obtaining corporate and foundation grants. Local manufacturers may realize that a Makerspace may be a good source of acquiring future talent, and entrepreneurs using a Makerspace may grow to the point that they will need their own industrial space, creating more manufacturers in the community, which provide higher paying jobs than retail or service jobs.

John said, “A Mobile Makerspace can also be used for job training and retraining by existing manufacturers in a community. It is also a cost- effective method to find potential employees and retrain

displaced workers. It could also be used to promote your permanent space by placing it out in the community, such as in front of a Walmart, flea market, or special event to educate your community about opportunities at your Makerspace.”

The electronic brochure that John emailed me provides more details about the Mobile Makerspace. It comes in a heavy-duty trailer rated at 9,990 lbs., and doesn’t require a special driver’s license. The trailer has a lower beavertail and a long ramp for easy loading.  It comes with an Etrack system and Ratchet straps for flexibility in securing the equipment. There are custom power options depending on your intended use. It can be configured with 12V DC lighting if being mainly used as a transport vehicle, and 120V AC or 220V AC Shore lines if you will be able to plug it in at your destination. Built -in or portable generators to operate anywhere are also available.  The machines are equipped with tie down hooks and retractable extensions cords.

There are many machine options to choose from for inside the Mobile Makerspace:

  • Mobile Tool Cart equipped with the tools
  • to make or fix nearly anything
  • Mitey Router, Mitey Mill, or Mitey Lathe
  • FabBotATC Router
  • 3D Printer Options
  • Laser Engrave/Cutter for cutting woods
  • Plastics CRP for cutting steel & aluminum
  • And many more in the Forest Scientific catalog

Mobile Makerspace can be utilized in two primary ways:

  1. As a transport vehicle, where the equipment is moved into a building at each destination
    1. Beneficial to share equipment when the climate, especially in cold northern climates is not conducive to having participants outside (especially at schools).
    1. If wired for electricity, it can also be used as a mobile lab.
    1. Usually not finished with a finished ceiling and may have a portable generator or just a shore line to keep the cost down.
  2. As a mobile lab to work in.
    1. Ideal to promote a fixed lab within a community.
    1. Ideal for sharing between Makerspaces and schools because there is little set up work upon arrival.
    1. Depending on the size of the trailer, you may be able to back it into a “shop” space and have little set up while isolating from adverse weather.

The brochure provided several options for configuring a Mobile Makerspace.  Below are examples of three packages:

Explorer Package – Ideal for promotion and working with students

  • Turnkey package including all equipment, computers, and software.
  • Custom 16 ft. trailer with custom graphics
  • Fabbot 2X2 CNC router with full enclosure on maker cart
  • 24X12 Universal Laser on Maker Cart with fume extraction
  • 3D Printer on Maker Cart
  • Three-year warranty
  • initial three-day training for success from day one
  • on-going tech support only a phone call away

Furniture/Housing Package – Wood and Plastic Sheet Production

  • Turnkey package including all equipment, computers, and software.
  • Custom 30’ Trailer with custom graphics
  • Makerfab 4X8 CNC Router
  • Dust collection
  • Maker hand and power tool power tool Cart with inverted router
  • Three-year warranty
  • initial three-day training for success from day one
  • on-going tech support only a phone call away

Manufacturing Entrepreneur Package – Make or Repair Nearly Anything

  • Turnkey package including all equipment, computers, and software.
  • Custom 34’ Trailer with custom graphics
  • FabbotATC 3X2 CNC router with full enclosure on Maker cart
  • CRP Metal cutting up to 1/2” Thick Pierce (Cut steel & aluminum)
  • 24 X 12 Universal Laser on Maker Cart with fume extraction (cuts woods & plastics)
  • 3D Printer on Maker Cart
  • Three-year warranty
  • initial five-day training for success from day one
  • on-going tech support only a phone call away

All Mobile Makerspace trailer packages are available for purchase or lease with a minimum of a one-year lease.  Funding sources for establishing a Mobile Makerspace can be sought through federal Economic Development grants, charitable foundation grants, corporate grants, and CARES Act grants before funds are exhausted. 

If your community wants to grow your manufacturing industry to create higher paying jobs, you should consider establishing a Makerspace.  To ascertain the type of manufacturing your community could grow, it may be beneficial to start off with a Mobile Makerspace. If your community has a well-established manufacturing industry, and the biggest problem is lack of skilled workers to fill jobs available, then you could focus on a Makerspace that would provide job training to students or retrain manufacturing employees in new skills.  If you are interested in either option, you can reach Joel Leonard at Joelskilltv@gmail.com and John Martinsic at johnm@forestcnc.com.

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U.S.-China Trade Policy is Focus of Day Four of CPA Conference

Tuesday, May 4th, 2021

The last day of the Coalition for a Prosperous America conference held on Friday, March 26th, was focused on U.S.-China trade policy. It’s gratifying to me that key elected representatives and officials are finally waking up to the fact that China is not our friend and instead is a threat to our national security.

Dennis Shea, former U.S. Ambassador to the World Trade Organization was the morning keynote speaker of the day in a live video.  He said, “China’s economic system is incompatible with the market rules of the WTO. China has not developed the market economy that was expected.  State-owned companies that are funded by state-owned banks and increased Chinese Communist Party (CCP) involvement in business has expanded in the past 20 years. Professor Mark Wu of Harvard Law School coined the term ‘China Inc,’ but Jude Blanchette, Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) has said that ‘China Inc.’ has become ‘CCP Inc.’ The WTO has proved itself incapable of making China comply with WTO rules.  The WTO requires 100% consensus of its 164 member countries, but China will never approve changes in any WTO rules.  The WTO has been a tremendous advantage for China.  There have been administrative changes proposed, but china has been adamantly against these changes.  Where do we go from here?  First, the WTO members need to recognize that there is a problem.”

Senator Gary Peters (D-MI), who is Chairman of the Homeland Security and Governmental Affairs Committee in the Senate, was the next speaker. He said, “I have opposed every trade bill that CPA opposed and supported every bill that CPA supported.  The Biden Administration has enacted the Defense Production Act (DPA) to bolster vaccine production and increase the supply of critical PPE.  The Pfizer vaccine is made in Kalamazoo, MI. They are now producing 13 million doses/week, up from 5 million. You can’t be a really great country if you can’t make things. It is important to focus on manufacturing.  There are 58 manufacturing programs spread out over 16 government agencies. I am pushing for a national Institute of Manufacturing, which would give manufacturing a higher profile with other programs. I proposed creating a ‘manufacturing.gov’ website to be a one-stop cite to help manufacturers. I am working to increase enforcement funding to protect small companies from unfair foreign competition and have introduced legislation to have the Department of Commerce help small companies who are being affected by dumping by foreign companies.”

His speech was followed by a panel on “How to Win the Great Power Rivalry with China,” moderated by Jon Toomey, CPA Government Relations Director.  Panel participants were: Senator Marco Rubio (R-FL), Rep. Bill Posey (R-FL), Roger Robinson, President & CEO of RWR Advisory Group, and Dan DiMicco, former CEO and chairman of Nucor Steel.

Senator Marco Rubio commented, “The 21st Century is going to be about the balance between the U.S. and China. China seeks to dominate all industries and become the superpower of the century.  Our inability to make things leaves us dependent on China.  Dependence can lead to China to millions of Americans achieve the American dream without creating higher paying jobs. It is now possible for an entrepreneur to make products and create wealth with no benefit to American workers. This led to multinational companies moving manufacturing to other countries to create wealth with the loss of jobs to American workers.  It is time for policy makers to step n and ensure that the free market works for the every day American. You can’t be a great power if you can’t make things.  It has been our ability to develop and make things that is important to our national security.”

Roger Robinson said, “President Trump’s E.O. 13959 prohibited U.S. investors from purchasing or investing in securities of companies identified by the U.S. government as ‘Communist Chinese military companies.’ There are now 44 companies listed, but we need to have a list like this for human rights violators. We could put 300 companies out of our markets.  The Secretary of Treasury needs to close the doors of funding for CCP companies. We need to turn off the investment funding for Chinese companies. “ He added, “We need to put China in a box that would be very difficult to get out of like President Reagan implemented against Russia.”

Rep. Posey said, “China has held an anvil over people’s heads. More and more people realize that it is time to do something. We need to use financial and economic measures to put the squeeze on China that we have never dreamed about before. We need to get behind a precise plan to go for the jugular.  But I don’t see any sign of a unified plan now.”

Dan DiMicco said, “There is no negotiating with China, and the meeting in Alaska made that clear. It was a provocative exchange on the part of the Chinese.  I hope the Biden Administration is saying ‘the free lunch is over.’ We have the greatest opportunity in 30 years to come together on our position with China.”

The last panel of the conference was “How Customs Enforcement Can Protect Jobs and National Security,” moderated by Chuck Benoit, CPA Trade Counsel.  The panelists participating were: Vincent Annunziato, Director at Customs & Border Protection, Dan Nation, Division President of Parkdale Mills, and Therese Randazzo, Division Director, Forced Labor at Department of Homeland Security.

Mr. Annunziato said, “The way we collect data is changing. We are using Blockchain to validate the entity data of businesses when we are investigating county of origin for imports that may be violating regulations. We need to ensure that the identity of the manufacturer and the country of origin are correct to be able to apply the correct Harmonized Tariff Schedule.”

Ms. Randazzo said, ‘Enforced labor is any labor conducted under some kind of force. There are 25 million people worldwide who are suffering from forced labor.” She explained that the Trade Facilitation and Trade Enforcement Act of 2015 “prohibits all products made by forced labor, including child labor, from being imported into the United States.” She said that her division looks into 11 indicators of forced labor:

  1. Isolation from family and confinement
  2. Physical or sexual violence
  3. Not free to leave
  4. Withholding of wages
  5. Deception
  6. Excessive overtime
  7. Debt bondage
  8. Intimidation or threats
  9. Abusing vulnerabilities of illegal aliens
  10. Abusive language or working conditions
  11. Retention of identity documents

She added, “Our division collaborates with other government agencies and NGO organizations.  There are four phases in the forced labor process: (1) investigate, (2) Issue press releases (3) goods are detailed, (4) issue a finding wherein products are not allowed to be imported.”

Unfortunately, due an appointment conflict, I missed the final video presentation of the day featuring Clyde Prestowitz, discussing his new book, The World Turned Upside Down, America, China, and the Struggle for Global Leadership. You can watch his presentation at this link. I could have watched the video to be able to quote a few comments, but his book deserves my writing a separate article about it after I read it.

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How Technology & Currency Policy Contribute to ‘Build Back Better’

Tuesday, April 20th, 2021

The panels on the third day (March 25th) of the virtual CPA conference highlighted how the technology industry contributes to national security and the economy as well as how a currency policy would contribute to President Biden’s “Build Back Better” industrial strategy.

Jeff Ferry, CPA Chief Economist, began the day’s program with a brief discussion of the white paper he wrote, “Reclaiming the US Solar Supply Chain from China, He said, “I looked at Section 201 tariffs on solar, which are 30% on solar modules, and we gained 19.8% market share from 2018 – 2019 after the tariffs were imposed. New companies came on line to make solar modules, and prices declined 8% that year as there was sufficient domestic competition.  Sales of solar modules and installations of solar also rose. Solar modules are downstream, but China controls over 90% of the upstream production of ingots and wafers. We only have three US polysilicon sources in Tennessee, Michigan, and Washington.  We need to make ingots and wafers in the U.S.  We proposed a “Made-in -USA solar tax credit” available to US-based solar manufacturers, increased federal investment in solar R & D, and strengthening Buy American policies requiring the federal government to buy only US-made solar equipment and power generated only from US-made solar equipment.

Jeff then introduced Roslyn Layton, PhD, co-founder of China Tech Threat, who participated in a live video from Denmark where she is currently working. Jeff and co-wrote a white paper that was released on March 22nd,  titled “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats.”

Jeff said that the steep decline in U.S. market share in global semiconductor manufacturing is a risk to U.S economic and national security. The U.S. semiconductor industry is in danger of being surpassed by foreign competitors, especially those in China. The U.S. must maintain leadership in the semiconductor industry.

Roslyn said, “The U. S. share of the semiconductor industry has shrunk to 12%, and U.S. companies are selling equipment to make chips to Chinese companies most of which are government-owned companies or allied with the Chinese military.  The semiconductor equipment and chips are now being used by the Chinese military. The export controls on sales of equipment have loopholes that allow American companies to sell to Chinese companies. Taiwan Semiconductor Manufacturing Corporation (TSMC) and Samsung in South Korea account for over half of global chip foundry production, and their governments offer lots of incentives to companies to make chips in their countries. We need to develop a comprehensive policy to increase chip production in the U.S. We need to be making 50% of the chips we need in the U.S. for our national security and to increase jobs.” The white paper makes key policy recommendations.

Next, Jeff Ferry moderated a panel on how the U.S. technology industry can maximize its contribution to U.S. national security and the economy..  Participants were Mark Widmar, CEO of First Solar, Steve Papa, Founder and CEO of Parallel Wireless, and Roslyn Layton. Mark Widmar said, “I joined First Solar 10 years ago.  It is one of the largest solar companies because it is the only company that produces advanced thin film photovoltaic (PV) module.” Mark said, “We started off with a disruptive technology,” and then briefly described the technology and its advantages over silicon solar panels. He said, “We have a very vertically integrated production system. Our headquarters is in Tempe, AZ, but we do R&D in California and have a production plant in Ohio.

When Jeff asked how the U.S. can compete against China, Mark said, “It’s difficult to compete against the unfair, anti-competitive, predatory pricing of the Chinese. The concern I have is that the U.S. has become the victim of solar at any cost. The solar industry grew over 19% in only 16 months after the tariffs were imposed.

Steve Papa said, “I compete against Huawei, and the problem is the government financing and subsidies they are receiving from the Chinese government.  We can beat Huawei with American innovation, but if we want to beat Huawei, we have to solve the capital problem. American venture capitalists are investing in American companies that have plants in China. We need more innovation capital here in the U.S.”

Mark added, “There is no new capital coming into the solar industry because of the pat history of company failures due to China dumping.  China is trying to stymie any new technology development in the U.S. We are too slow to respond to competition. If we don’t address the root cause, Chinese government subsidies to their solar industry, we won’t succeed in the long-term.” 

After this panel, Michael Stumo, CEO of CPA, moderated a panel on currency policy.  Panel participants were Marty Davis, Cambria USA, Jason Kearns, U.S. International Trade Commission (ITC), and Stephen Vaughn, Partner of King & Spalding (trade lawyer).

Jason Kearns began by saying, “The ITC does three main things: (1) act as judges in trade cases, determine if there is surge in dumping cases and determine if imports are being transshipped, (2) provide reports to the President and Congress (3) change numbers on tariffs.”

He added, “The trade mindset is changing – more assertive approach to handle trade and process more reports and economic studies, but we are not receiving funding for more work. The ITC has a more important role to play. Prior to Trump’s implementation of tariffs, we really had no leverage in handling trade cases.”

Marty Davis said, “Cambria was founded about 20 years ago in the early 2000s. We have invested about $450 million in equipment to make quartz slabs for counter top industries. Then, China started dumping quartz slabs, and by 2016, China had 65% of the marketplace.  China violated our intellectual property. We started exploring trade enforcement with the ITC as China has violated trade law.  Chinese companies are selling slabs below the cost of the material. We filed a case with the Department of Commerce and the ITC.  We had to prove “standing” to be able to file the case, and we were able to do so because we controlled 60% of the market before the Chinese dumping. The resellers protested the case because they wanted cheap products. After winning the case, we got 300-500% tariffs, and we are going to invest $120 million in new plants. We had to spend $5 million to win the case.”

Stephen Vaughn stated, “Free trade was the policy from the end of the cold war in the early 1990s onward.  President Trump changed all this and was willing to take the heat. I worked under U.S. Trade Representative Robert Lighthizer during the Trump Administration. We did what the Administration wanted us to do. We should be asking: Do we want a middle class?  What industries do we want to have?  We need to make policy decisions based on the outcomes we want.”

The outcome I want is a strong domestic manufacturing base that creates higher paying jobs, so more Americans will be able to be in the middle class.  This goal has been the focus of everything I have done for the past 13 years by writing three books, writing hundreds of blog articles, and giving hundreds of presentations wherever I can.  This is why I’ve been a member of the Coalition for Prosperous America since 2011 and have attended six previous in-person trade conferences.

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Second Day of CPA Conference Focuses on Tax Reform

Tuesday, April 13th, 2021

The second day of the CPA virtual conference held March 23-27th featured two panels: the first on the topic of “Reforming Corporate Taxation to Help Reshore Our Industries,” and the second on ”Buy American.”   In the first panel, the focus was on whether or not additional tax reform is needed by Congress to make sure that tax loopholes that currently favor multinational corporations over domestic companies will be closed.

The Tax Cuts and Jobs Act of 2017 (TCJA) reduced corporate tax rates to a flat tax of 21% from a graduated tax system ranging from a low of 15% to a high of 35%.  At the time, the U. S. had the highest corporate taxes in the world after Japan had reduced their corporate tax rate to 30.86% in 2016, down from a high of 40.69% in 2010.

David Morse, CPA Tax Policy Director, moderated the panel, which began with a tribute to Bill Parks for his work on Sales Factor Apportionment. Mr. Parks is Founder and President, Northwest River Supplies and Founding Director, SalesFactor.org, “which works to advance tax policy that would level the playing field between domestic and multinational corporations, improve U.S. competitiveness in world markets, and foster the long-term health of the American economy.”

Simply stated, Sales Factor Tax Apportionment would tax U. S. and foreign multinational corporations based on their sales in the United States. In other words, the profit a company generates on its U.S. sales would be taxed. These taxes would have to be paid to do business in the U. S.  This would eliminate profit shifting to divisions in other countries or claiming residence in a country with lower or no corporate taxes in order to avoid U.S. tax obligations.

Senator Bill Crapo (R-ID) participated in the panel with a pre-recorded video in which he paid tribute to the work of Bill Parks, whose company is in his state.  He touted TCJA for reducing corporate taxes and stated that it stemmed offshoring of American manufacturing and helped reshoring.  He said that we could strengthen TCJ with legislation on Sales Factor Tax Apportionment.

Representative Bill Pascrell (D-NJ) also participated in the panel with a pre-recorded video.  Rep. Pascrell is on the Ways and Means Committee in the House, and he said that the current tax system is tilted to wealthy and large corporations at the expense of small to medium-sized businesses.  In his opinion, TCJA wasn’t tax reform, and real tax reform is needed.

Ji Prichard, who is Tax Counsel on the House Ways and Means Committee, shared that tax reform is under discussion in the committee.  President Biden’s “Build Back Better” campaign plan had a “carrot and stick” approach to reshore manufacturing – a 10% tax credit for reshoring and a 10% fine for offshoring. 

The third panelist Professor Reuven Avi-Yonah, Irwin I. Cohn Professor of Law and director of the International Tax LL.M. Program at the University of Michigan.  Professor Avi-Yonah has written extensively on the subject of taxes. He supports the Sales Factor Tax Apportionment because he believes that it will solve a major problem in the tax code:  tax avoidance by multinational corporations through profit shifting to offshore entities and reincorporating in tax haven countries. The problem with the OCED tax proposal is that it is only focused on digital transactions that would hurt American high-tech companies. He believes that SFA could be applied unilaterally.

The Buy American Panel was moderated by the Co-Chairs of the CPA Buy American Committee: Greg Owns, CEO, Sherrill Manufacturing and Liberty Tabletop, and Jim Stuber, Founder of Made in America Again and author of What if Things were Made in America Again.

Senator Tammy Baldwin (D-WI) participated in the panel via a pre-recorded video.  She said, “Wisconsin is a state that makes things. We are #1 or #1 in manufacturing of paper, tools, and ships.  It is very important that we produce the things that keep us safe and healthy. When the pandemic started, we saw a shortage of masks, gloves and other PPE. The American Rescue Plan for COVID relief included 10 billion dollars for government purchase of essential goods under the Defense Production Act.” She also said, “The pandemic made it clear that we need country of origin labeling (COOL) for online purchases.  I appreciate CPA’s help in drafting a bill. There are lots of gaps in the Buy American policy for infrastructure. Trade deals have provisions that give foreign companies the right to bid on government procurement. There are 16 countries that can bid as if they are an American company.  But the President can waive these provisions of trade deals in emergency situations.”

Senator Cynthia Lummis (R-WY) participated in a live video, and she said, I support country of origin labeling.  I am a lifelong rancher. We need more domestic products.  Wyoming has rare earth minerals and is an energy producing state.  Buying local and buying American grew in importance during the last year.  I think food security is a national security issue.  You can count on me as an ally on Buy American.”

Representative Claudia Tenney (R-NY) said she is the representative for the district in which Greg Owen’s company is located and also where Revere Copper is located (owned by Brian O’Shaughnessy, CPA’s Vice Chair.) She said that 94% of workers in her district work for small businesses. She also supports Buy American and country of original labeling.

The last panelist was Brad Markell, Executive Director of the AFL-CIO Industrial Labor Council.  He said, “This is the manufacturing arm of the AFL-CIO that includes the presidents of all of the unions in the manufacturing industry. The Trump Administration made great strides on Buy American. The Biden administration left these Executive Orders in place and have added two more E. O.s related to Buy American and supply chain.  Too many government agencies have waivers for Buy American. The manufacturing component of infrastructure is high for construction. Every time the federal government spends money is an opportunity to create jobs.”

The day’s session ended with closing remarks by Bill Bullard, CEO of the Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA).  He said, “The cattle industry is the single largest segment of U.S. agriculture generating about $65 billion in sales. There are about 729,00 farmers and ranchers in the U.S., down about a half million the past 40 years. Farmers and ranchers are scattered across the country and in nearly every county. Since 1990, we have lost 200,000 cattle ranches and millions of cattle. The U.S. underproduces cattle to supply demand and imports are increasing.  We import beef from 20 countries and about two million live cattle from Canada and Mexico each year. Since NAFTA, the amount of beef we import from Canada and Mexico has tripled, so that we’ve accumulated a $40 billion deficit. Retail prices have risen, especially since 2017, but the rancher’s share of the price has drastically dropped.  This is because there are only four meat packing plants in the U.S. and two are owned by Brazilian companies, so when you have many sellers and few buyers, the price drops.”

Bill’s proposed solution to this problem is country of origin labeling for retail sales that states where the cattle was born, raised, and slaughtered.  Imported beef that is repackaged must also reveal the country from which it is imported. This would be non-discriminatory to all countries. He also stated that “Buy American” policies for federal procurement should require that beef procured for school food programs and the military should fit the criteria of born, raised, and slaughtered in the U. S.  He urged everyone to contact their Congressional Representative and Senator to support country of original labeling for beef.  

We learned a hard less during the COVID pandemic about the dangers of being reliant on foreign countries for our pharmaceuticals and PPE. We must not allow foreign imports of beef and foreign ownership of meat packers to endanger the largest segment of agriculture products. Protecting the safety of our food production is a national security issue.

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CPA Annual Trade Conference was a Virtual Success

Wednesday, April 7th, 2021

The Coalition for a Prosperous America held its annual trade conference virtually for the first time on March 23 – 26, 2021. I had the pleasure of attending the annual trade conference in person six years in a row when it was held in Washington, D. C., but last year’s conference had to be canceled on short notice because of COVID shutdowns.  This year’s virtual conference was free to all CPA members and the program ran from 11 AM – 4 PM ET each day. The conference was a huge success because of the valuable content of the sessions, lack of technical glitches, and Melissa Tallman’s hard work.

On the first morning, CEO Michael Stumo and Board Chairman Zach Mottl of Atlas Tool welcomed everyone and gave an overview of the conference.  Michael Stumo outlined the following CPA’s priorities for 2021:

  • Promote reshoring of pharmaceutical and health care products
  • Fix overvalued dollar
  • Support customs enforcement vs. lawlessness
  • Create model tariff schedule to increase tariffs across the board  
  • Support decoupling from China
  • Focus on domestic production of energy, oil, gas, and renewables, such as solar
  • Continue Job Quality Index, now licensed to Bloomberg and Yahoo Business
  • Show how job quality affects minorities
  • Support reshoring of semiconductors
  • Support Country of Origin Labeling (COOL) for beef, pork, and online sales

The first session was a panel on Reshoring Healthcare, moderated by Rosemary Gibson, author of China RX.  Panelists were, Eric Edwards, Phlow Pharmaceuticals, Usman Ahmed, Nexus Pharmaceuticals, Jon Toomey, CPA Government Relations Director, and Rep. Vicky Hartzler (R-MO), pre-recorded.

Rep Hartzler said in October 2019, she and Rep. John Garamendi (D-CA) introduced H.R. 4710, the Pharmaceutical Independent Long-Term Readiness Reform Act. “The legislation requires the Department of Defense to identify the vulnerabilities faced by our country’s dependence on Chinese pharmaceuticals, and to only purchase American-made raw materials, medicines, and vaccines for the military.” While the bill wasn’t passed in the last session, they were able to get part of it into the NDAA for 2021.

Eric Edwards said he founded Phlow last year as a public benefit corporation to use advanced manufacturing technology to produce critical and essential drugs using strategic partnerships with Civica Rx, Virginia Commonwealth University’s Medicines for All Institute, and AMPAC Fine Chemicals to make chemical precursor ingredients, active pharmaceutical ingredients (APIs), and finished dosage forms for over a dozen essential medicines to treat hospitalized patients with COVID-19-related illnesses.

He said, “In May 2020, we were awarded federal funding of $354 million for advanced manufacturing of America’s most essential medicines from BARDA, ASPR, and DHHS  [Biomedical Advanced Research and Development Authority (), part of the office of Assistant Secretary for Preparedness and Response (ASPR) at the U.S. Department of Health and Human Services]  We now have 20 employees and will be up to 50 by mid-year, ramping up to 350 by next year when we are in full production.”

Usman Ahmed shared that Nexus was founded in 2003 by his parents in Lincolnshire, Illinois, using contract manufacturers in the United States and Europe difficult-to-manufacture, high-quality specialty and generic drugs. However, when critical drug shortages became apparent at the start of the COVID pandemic, they made plans to build their own manufacturing plant in Pleasant Prairie, WI. When the plant opens soon, they will shift some of the manufacturing in-house to make medications including those used in critical care, cardiac care and the central nervous system.

Rosemary Gibson said that the research for her book revealed that 80% of pharmaceuticals are made in China, so there is a critical need to reshore.  Last October, the FDA published a list of 227 drug and biological product essential medicines, as well as a list of 96 device medical countermeasures.

The next session was “How Can a Currency Policy Contribute to ‘Build Back Better” Industrial Strategy,” moderated by CPA board member Marc Fasteau.  Panelists were, Joe Gagnon, Senior Fellow at Peterson Institute for International Economics, Brian O’Shaungnessy, Chairman of Revere Copper, Jeff Ferry, CPA Economist, and Robert Scott, Senior Economist and Director of Trade and Manufacturing Policy Research at the Economic Policy Institute.

Jeff Ferry stated that the value of the U.S. dollar has gone up by 30% since 2013, and the overvalued dollar depresses our economy and increases our trade deficit. Each one-billion-dollar trade deficit costs 6,000 jobs, so our 2020 deficit of ___ cost four million jobs.  Goss capital inflows in 2020 were $40 billion. The dollar is currently overvalued by 24.6%.  If the dollar was devalued by 6%/year, it would achieve trade balance in four years and add 3.7 million jobs and add 1% to the national GDP.

Brian O’Shaughnessy said that Revere was founded by Paul Revere in 1801 so may be the oldest company in the U.S. The Revere line of cookware was sold off in 1989, so now Revere makes copper sheet, plate and strip for industrial applications.  He said, “all of our principal competitors have gone bankrupt because of overvalued dollar making it difficult to compete in the global marketplace, and foreign competition has prevented investment.”

Joe Gagnon stated that the trade deficits prove that we have an overvalue dollar, and the dollar has been overvalued for a long time.  We need to have a countervailing currency intervention to address the overvalued dollar.  Other countries are buying U.S. currency to build dollar reserves, and the U.S. could buy foreign currencies.  We could also tax foreign purchases of U. S. dollars.

Rob Scott discussed past actions to rebalance currency and said that from 2000 – 2013, foreign government currency manipulation contributed to the problem and from 2014 to the present, private investors buying dollars and other U.S. assets have added to the problem.  He said, “Action is needed now to rebalance the overvalue dollar to create good paying jobs for non-college graduates.  The simplest way is to charge a tax on net purchases of assets” as proposed by the Market Access Charge that CPA has endorsed.

The first day ended with a report by CPA Government Relations Director, Jon Toomey, giving an inside view of what to expect in 2021. Future articles will cover the rest of the conference.

The major sponsors for the conference were:  MFGgear™, The Consilio Group, IT Guidepoint, SK International, and Amodex. Other sponsors were Liberty Tabletop, MadeinAmericaAgain.org, MadeinAmerica.com and my book Rebuild Manufacturing – the key to American Prosperity.

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Are Americans Losing the “American Dream?”

Wednesday, March 31st, 2021

One definition of the “American Dream” is “The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society in which upward mobility is possible for everyone. The American dream is believed to be achieved through sacrifice, risk-taking, and hard work, rather than by chance.” Wikipedia states, “The American Dream is rooted in the Declaration of Independence, which proclaims that “all men are created equal” with the right to “life, liberty and the pursuit of happiness.” The question is:  Are we losing the “American Dream.?” 

What the “American Dream” means to me is access to a good education, ability to have a good paying job, owning a home, and living in a safe, pleasant neighborhood.  In other words, someone living the “American Dream” would be comfortably in the economic middle class in the United States.  Let’s consider what has happened in the past 50 years.

The chars below shows that the U. S. has been running a trade deficit since 1976. This means that we import more products than we sell.  In 2020, the U.S. trade deficit was $678.7 billion, according to the U.S. Bureau of Economic Analysis (BEA), and more 42.1% of the U.S. trade deficit in goods is with China.  

Trade deficits can occur for the following reasons:

  • A country’s inability to produce some goods.
  • Better quality of some foreign goods.
  • Cheaper foreign materials.
  • Lower foreign wages.
  • Lower foreign capital costs.
  • Subsidies from foreign governments to their manufacturers.

The last four reasons have been the main reasons for our trade deficit with China.  China does not have a free-market economy; it is a controlled by the Chinese Communist Party, which uses mercantilist policies of product dumping, currency manipulation, intellectual property theft, and government subsidies to take over markets in the United states.

Higher Paying Jobs Disappearing

Trade deficits can result in a loss of up to 6,000 jobs for each one billion dollars of trade deficit. Since China joined the WTO in 2001, the US has lost 77,000 manufacturing establishments (factories), and nearly six million manufacturing jobs since the peak shown below in 1980.

Percent Manufacturing Jobs in the U.S.
Year Manufacturing Jobs (Millions) Percent Manufacturing Jobs
1976 17.8 Million —
1980 18.6 Million 20.5
1990 17.3 Million 16.1
2000 17.1 Million 13.0
2010 11.5 Million 8.9
2019 12.8 Million 8.5

https://www.census.gov/foreign-trade/statistics/historical/index.html

Manufacturing jobs are the foundation of the middle class and as we lose manufacturing jobs, we are losing the middle class.  As a result, median yearly wages have stagnated, only growing from $19,822 in 1985 to $51,916 in 2019, which is only a 1.21% average annual percent of change for a total 61% increase in 34 years, hardly enough to keep up with the annual rate of inflation.

In November 2019, the U.S. Private Sector Job Quality Index (JQI) began “to assesses job quality in the United States by measuring desirable higher-wage/higher-hour jobs versus lower-wage/lower-hour jobs… “job quality” means the weekly dollar-income a job generates for an employee.”  The JQI White Paper states: “The size and composition of the U.S. labor force have changed substantially over the past quarter century…The percentage of private U.S. jobs in the service-providing sectors increased steadily from approximately 55% during the years immediately following the end of World War II through the end of the Great Recession in 2009. However, the percentage has remained flat—at around 83.5%— since that point.”

As a result of creating more lower paying service and retail jobs, the average hourly wage nationwide is $11.31/hour for a yearly average pay of $22,620 compared to the yearly average base pay of $47,945 ($23.97/hour) for a manufacturing job according to Glassdoor.  However, a skilled automotive worker can make as much as $70,204 per year ($35.10/hour).

Another advantage of jobs in manufacturing is that they create more other support jobs that a retail job does. One the average, manufacturing jobs create 3 – 4 other indirect jobs, compared to less than one job for retail, but certain manufacturing jobs create more other jobs as shown below:

Industry Direct jobs Total indirect jobs
Manufacturing
Steel product manufacturing from purchased steel 1 12
Motor vehicle manufacturing 1 14
Retail
Food and beverage stores 1 0.7
General merchandise stores 1 0.7

The lack of growth in wages hasn’t been at the same rate for all income levels according to data from the Economic Policy Institute:

  Bottom 90% Top 5% Top 0.1%
Net Growth in Wages 1979- 2019 26.0% 75.1% 345.2%

Middle Class Shrinking

According to a Pew Research Center study, this stagnation of wages has caused a decrease in the percentage of Americans that are in the middle class.  In 1970, 62% of Americans were in the middle class, but only 52% of Americans were in the middle class in 2018.

Home Ownership Stable

The good news is that home ownership nationwide has been relatively stable in the past 50 years, actually increasing from 64.0% in 1970 to 67.9% in the 1st quarter of 2020 according to data from FRED.  

Why did we lose so many higher paying jobs?

I’ve written three books discussing this problem and what we can do about it, but in a nutshell, I can condense the reasons to the following major causes:

  1. Trade agreements such as NAFTA with Canada and Mexico (1994) that benefited our trading partners more than the U.S. and began the process of outsourcing jobs to other countries, primarily Mexico.
  2. Granting China Most Favored nation status in 2000 (now called Permanent Normal Trade Relations) and allowing them to become a member of the World Trade organization. This caused a mass exodus of manufacturing jobs from the U.S., either by outsourcing manufacturing to Chinese companies or American companies setting up manufacturing plants in China.
  3. Ending tariffs on imports from trading partners as part of the regulations of the World Trade Organization Agreement.
  4. Tax policies that favor multinational global corporations, allowing them to shift profits to other countries and encouraging them to outsource manufacturing jobs.

How can we create more higher paying jobs to restore the American Dream?

Since it took us nearly 30 years to get to this point, there is no simple, rapid solution. However, there are steps our government has taken and can take to accelerate restoring the American Dream:

  • Renegotiate existing trade agreements to require trading partner countries to purchase more U. S. agricultural products and energy products such as oil, gas, and renewables.
  • Maintain current tariffs and expand tariffs to other critical, essential products
  • Pass Sales Factor Tax Apportionment legislation, which would require multinational corporations to pay taxes on the profits of their sales in the U.S., discouraging profit shifting.
  • Pass Market Access Charge legislation to tax foreign entities and individual on purchase of U.S. assets; i.e., stocks, bonds, companies, and property, which would gradually balance the overvalued dollar.

These recommended policy steps have been described in more detail in past blog articles available to read at www.savingusmanufacturing.com. And, these policies were discussed at the annual trade conference held virtually on March 23-26, 2021 by the Coalition for a Prosperous America, about which I will be writing in future articles.

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Maketory Grows New Manufacturing Companies in San Diego

Tuesday, March 9th, 2021

It’s exciting to have a new Maker Space in southern California. Maketory is an industrial coworking facility that provides flexible fabrication and manufacturing in a 26,000 sq. ft. building in the Miramar/Mira Mesa area of San Diego, California.  Since opening in December 2019, Maketory has become a hub of creativity and innovation for inventors, innovators, and entrepreneurs as the only Maker Space south of Carlsbad in north San Diego County.

I visited Maketory on February 11th and was given a tour by Manager Shaun Kain.  He said that they offer private office suites, private work studios, on-site storage for materials and supplies, free Wi-Fi and free parking. The ground floor of the facility contains a wood shop, metal shop, welding area, prototype/assembly area, 34 private work studios, and a blacksmith shop outside the back of the building.  The second floor has a small and large conference room, an open space for meetings or training sessions, and private offices.

The wood shop contains the following equipment: a 4’ X 8’ 3-axis router, bandsaw, table, scroll, panel, and chop saws, lathes, drill presses, wide belt sander, disc, spindle and edge sanders, a 20” planer and 12” jointer.

The metal shop has 10’ X 6’ Flow waterjet, MIG and TIG welders, belt and disk grinders, manual lathe, manual and CNC mill, plate roller, shear, and tube bender, cold saw, band saw, and drill press.

The prototyping/ assembly area contains 150- and 80-watt lasers, 3D printers, and workbenches. The blacksmith shop contains 110- and 135-ton pneumatic hammers, 50-ton screw press, as well as forges, anvils and hammers.

I was also able to speak with Carlos Shteremberg, one of the founders of Maketory When I asked for background information to help understand why he established Maketory, he said, “I was born in Mexico City and moved to San Diego in 1998 and got a degree from USD in business and accounting. I worked in manufacturing and became president of Pico Digital, a communication company that provided digital TV to hotels and apartments. We were a partner with Dish Network and had a significant market share. The majority of our manufacturing was in San Diego, as well in Taiwan, Canada, and Mexico. The company was purchased in 2016 by HIG Capital, a private equity firm, but I continued as president for a while.  Then, I looked for something to do next, and we created Maketory, a facility that would be a place for coworking and small-scale manufacturing while serving as a tech and industrial incubator for the San Diego community.” 

He explained, “I learned that opening a new business is always more difficult than you expect and takes more money than you expect.  So, you have to endure some rough times, and some entrepreneurs give up. It’s also hard to transition from working in an established business to starting a new business.  We wanted to create an environment where businesses and individuals can quickly achieve success with minimal investment. Not everyone is a software developer that can work out of a home office or a traditional coworking space. There are a lot of individuals, small businesses, and entrepreneurs that have to do physical things so they need a physical operating space that isn’t cost prohibitive. Also, people don’t want to be alone so a Maker Space creates a social atmosphere.” 

In response to my question about funding to start Maketory, he said, “We are totally self-funded as a for-profit corporation when most Maker Spaces have a non-profit sponsor.  Our lowest membership is $249/month for using all of the shop space.  Private work studios and offices start at $300/month.  We require a commitment of one year for a membership agreement because we want to develop a commitment of respect for our facility and equipment. We have a professional staff of managers and instructors for the classes we provide. At Maketory you to go as fast as you want. We have some of our members that have been able to make products in only a few weeks.”

He added, “Larger existing companies can benefit from using the facilities of Maker Space to develop prototypes for new products because there are many companies that subcontract out manufacturing services and don’t have the in-house equipment to make a prototype.”

I asked if they offered classes on how to use the equipment, and he said, “Yes, our Maketory Academy provides classes for operating every machine, as well as how to design, Lean manufacturing, and robotics. Members have to pay separately for the classes they need, which range from $120 – $350, depending on the topic. We partner with LSSI and CMTC to help some members get help on subsidizing the classes. Our Maketory Academy is an aspect of our business that we see expanding into the future to service the San Diego community, including students, colleges, high schools, veterans, active military. And local entrepreneurs. The Lean training is provided by LSSI, headed up by Luis Socconini.”  I told him that I got my Lean certification from LSSI in 2014.

I asked how they were affected by the COVID pandemic that put another Maker Space, Vocademy, out of business in Riverside.  He said, “We had only been open three months, so it hurt to have to close for a few weeks.  But it gave us time to put the safety protocols required by the state in place before opening back up in May.  We now have about 160 members. Most of our members stuck with us during the shutdown, unless they had to move out of town for a personal reason or job.” 

I told him that I’ve been a board member for the San Diego Inventors Forum and give an annual presentation on how to select the right processes and sources for your new product. I offered to give the presentation in person for his members or record a video that could be watched by his members. He said that sounds like a good idea. 

In conclusion, Maker Spaces are a good idea for any community that wants to accelerate the development of manufacturing businesses in their region. After visiting Maker Spaces in several states, Maketory is one of a very few that have been started by an entrepreneur as a for-profit business. Most Make Spaces have had an economic development agency, chamber of commerce, or community college as their sponsor.  Let’s hope that more successful entrepreneurs will follow the example of Carlos Shteremberg in the future.

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American Patriot Loses Battle with Cancer

Monday, February 22nd, 2021

On Sunday evening, February 14th, Curtis Ellis passed away from a long struggle with bladder cancer at the age of 67. Curtis was a true patriot and defender of liberty, who believed in all of the greatness our country and devoted much of his life to putting American first in economic policies to benefit American workers and not just Wall Street. Curtis’ career included work as a campaign manager for state and federal elections, working for Congress as a media liaison for the New York State Senate Central Staff and held a senior staff position in the U.S. House of Representatives. He had decades of experience as a journalist, producer, writer and reporter for the New York Times, San Francisco Chronicle, Chicago Tribune, Time magazine and other outlets, such as HuffPost and World Net Daily. He appeared on 60 Minutes, HBO, NBC, CNN, NPR, MSNBC, Fox Business and Fox News, as well as national and regional radio shows.

I had the pleasure of becoming one of his friends when in 2011, I was recruited to join the board of directors for the American Jobs Alliance (AJA).  Curtis functioned as the part-time Executive Director from 2011 – 2016 for AJA, an independent non-profit organization promoting American jobs and Buy American policies.

Den Black, President of AJA shared that he first met Curtis Ellis in 2004 in the Buffalo New York region when his good friend, Jack Davis, decided to run for Congress in the New York’s 26th District. He said, “Jack was under attack by the Chinese who were manufacturing his industrial electric furnace, silicon carbide, heating elements in China, and marketing these items in America at prices below Jack Davis’ cost. Curtis, who lived in Manhattan, became aware of Jack’s efforts to ‘take on the Chinese’ and offered to assist Jack with his fight against the Chinese unfair trade practices.

He added, “Jack Davis accepted Curtis’ offer to help on his campaign and based his campaign on the theme of ‘undoing’ the disastrous ‘Free Trade’ practices that had caused the hollowing out of American manufacturing since the 1970’s and 80’s. Curtis came to Buffalo and gave his all for the campaign, but unfortunately, Jack Davis lost the Congressional race.  Curtis resumed his life in Manhattan, but our passion to work to ‘undo’ the unfair trade agreements continued unabated, and we continued to stay in touch.”

He explained, “In late 2010, Curtis suggested that Jack Davis and I form the American Jobs Alliance as a non-profit with the mission to educate Americans about the negative impacts of the ‘Free Trade’ agreements, such as NAFTA, on American workers and families and promote Buy American and Hire American policies. We quickly learned that the ‘Free Trade is Good’ ideology was deeply imbedded in the seats of American power, including Wall Street, global manufacturing giants, and the Washington establishment. We realized that causing any real change was huge challenge in the early years; but Curtis never wavered in his single-minded pursuit of putting American workers first.  Curtis played a big role in the AJA effort to prevent the Tran-Pacific Partnership (TPP) from being ratified during the Obama Administration.”

He concluded, “Subsequently, Curtis carried his passion for American workers over into the Donald Trump for President campaign, but he continued to support AJA’s work and write articles for our website.  It was his idea last year to make and sell window/bumper decals saying ‘Boycott China for Jobs, Human Rights, Peace.’ All working Americans owe a huge debt of gratitude for his steadfast, single-minded, efforts on their behalf over the decades.”

After years of interaction on the AJA board and private phone conversations, I finally got the opportunity to spend time with Curtis when I attended the annual trade conference in Washington, D. C. put on by the Coalition for a Prosperous in March of 2017. Curtis was then working as a special advisor to the Secretary of Labor as part of President Trump’s transition team after working on the presidential campaign.  He went back to work full-time as communications consultant and senior policy adviser with America First Policies after his responsibilities on the transition team were finished in September 2017. 

Another board member of AJA, Greg Autry, co-author of Death by China and former NASA White House Liaison under President Trump, wrote me the following after I notified him that Curtis had died: “I’m proud to have been able to work with Curtis Ellis for more than a decade in support of American manufacturing jobs and our nation’s future. Curtis was a tough, straight talking man of action with a heart of gold. He genuinely cared about the outcomes for workers, business owners, and those living under the boot heel of China’s authoritarian regime. In the long, hard fight over trade reform, Curtis was always there with a good idea and a supportive comment.” 

On February 15th, World Net Daily founder Joseph Farah published an eulogy, “Farewell fellow Traveler, Curtis Ellis.”  You can readd his full article here.  Farah had known Curtis from when they were both about 16 years old and were left-leaning radical revolutionaries. He reconnected with Curtis several years ago when he was working as a senior policy adviser for America First Policies. Curtis Ellis began writing a weekly exclusive column for WND in 2014, and Farah said “He will be missed.”

On Monday, February 15th, radio talk show host John Fredericks gave his own testimony on his friend Curtis Ellis in the first hour and then had their mutual friend, Steve Bannon (War Room podcasts) as a guest on his show during the second hour.  John called Curtis an “American prophet” and said “he had the greatest sense of humor. I had him on my show nearly every week for ten years, and every time I was with him, he made me laugh.”

Bannon said, “Curtis had a hand on the pulse of labor which most conservatists don’t.  He was the first guy that laid down the planks and fundamental elements of economic nationalism that truly drive the agenda. There are tens of thousands of workers going to plants and factories that have jobs because of the policies and thinking of Curtis that were put in place. He will be remembered in history. Curtis was a legendary guy in the Trump movement.  Peter Navarro and Curtis put together the whole economic program that President Trump ran on. He was critical to the 2016 campaign. He always put the American worker first. He was a deep thinker and also an activist.

In the administration, Navarro worked on the inside and Curtis stayed on the outside to work the PACs and policy institutions. He was very early on about the CCP. He understood the world economy and the globalization project, and because he was so close to labor, he understood that the globalization project was built on the backs of slave labor in China and would turn American workers and Western Europe Union into ‘Russian serfs.’ He was relentless and because he was relentless, he cut across the grain, which is why he never had support from the ‘establishment.’  He was one of the first guys to recognize that and the first to point out ‘free trade’ was a fallacy because of the mercantilist, totalitarian dictatorship in. China. He called out the Chinese Communist part, Wall Street, and the City of London.  He had a major impact on where we are.”

Michael Stumo, CEO of the Coalition for a Prosperous America, wrote me “Curtis was one of the only political campaign managers to focus upon returning jobs and industry to America. He worked as both a Democrat and a Republican because party affiliation was secondary to his values. Curtis blazed the trail that became both Make America Great Again and Build Back Better. He was one of the very talented few who could quickly transform a complicated economic topic into an easily understandable and compelling narrative that could motivate people to act. Curtis will be missed.”

Curtis had a love affair with America and believed that we have to fight to save America to create jobs and prosperity. We need to “up our game” and bring higher paying manufacturing jobs back to America.  This is the best way we can honor his memory and carry on the torch. I will continue to work to do my part by writing and speaking to honor his memory.

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